PM Daily Market Commentary - 2/19/2015

Gold fell -6.10 to 1206.70 on moderate volume - silver dropped -0.12 to 16.34 on moderate volume as well. Both gold and silver tried to rally during London trading and failed, meeting resistance at the falling EMA-9 and then selling off throughout the NY session right into the close. Both printed "shooting star" candles, which indicate failed rallies. The day's price action most definitely did not confirm yesterday's rebound in gold.

While gold remains above the low of 1197 from yesterday and that means the bounce is still in play, things are not looking so great for gold right now.

The USD rose today, climbing +0.37 to 94.49, remaining in its recent trading range. It looks like any dollar weakness stemming from the FOMC's reluctance to raise rates reflected in the minutes release was short-lived. Most currencies have tracked sideways vs the dollar since late January, apparently unsure of direction following the Syriza election.

Mining shares more or less sold off all day long, with GDX down -2.38% on moderate volume, and GDXJ fell -2.27% on moderately light volume. Both mining ETFs remain just above their 50 MA, and neither of them made new lows today. The losses today entirely wiped out gains made yesterday. That's not bullish, although it is positive that the 50 MA is still acting as support.

SPX had yet another narrow trading range day, closing down -2.23 to 2097.45. Not much happened today. VIX fell -0.16 to 15.29.

Long bond ETF TLT fell, dropping -0.66% and making a new closing low for this cycle. The weak bond market is not signaling an equity market top, nor am I getting a sense of any renewed safe haven pressure.

The CRB (commodity index) dropped -0.45% but managed to remain above its EMA-9. Momentum in the commodity rally is waning somewhat.

WTIC rallied, closing up +1.69 to 52.17, regaining much of the ground lost in yesterday's sell-off. Volume continues to be heavy. WTIC was down until the Petroleum Status report at 1100 EST, which showed that oil in storage grew by "merely" 7.7M barrels, after which oil rallied back strongly. I guess the market was prepared for a much larger number, so this was a bullish surprise. I'm starting to see an ascending triangle in WTIC, which is a bullish pattern. Resistance is just below 55.

Today, the Greek government submitted its proposal, which appeared (to me, at least) to cave in to German demands. Germany rejected the proposal out of hand.

German Finance Ministry spokesman, Martin Jäger, quickly issued a statement saying the letter from Athens was “not a substantial proposal to resolve matters.” Mr. Jäger said, “The written document does not meet the criteria agreed in the Eurogroup on Monday.”

One suggestion I read which seemed to be the most plausible explanation for the immediate German "no" is that once again, Greece is being used as an example. Under this theory, Syriza must be utterly humiliated in negotiations with absolutely no changes made to the terms of the Greek "bailout" (actually a German/French bank bailout paid for by Greece), so that the other far left challengers to the status quo in Europe are not encouraged, namely the Five Star party in Italy, and the Podemos party in Spain. Of course, the longer German intransigence on indebtedness continues, the more radical the political movements will become in the periphery. If Schauble doesn't work with Syriza today, in another few years he will have to deal with Golden Dawn.

Markets still are assuming all will be well, based on my reading of the tea leaves. Eurogroup (the EZ Finance Minister Club) meets Friday to consider the Greek proposal.

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3 Comments

Agreement reached (in draft form) between Greece and the Eurogroup (the EU Fin Min Club), with more details to be filled in later. Looks like we revisit the whole issue in another 4 months.

There was only a muted reaction from the market - PM sold off modestly (gold slowly dropped about $7) and US equities rallied somewhat, but it looks like the market had largely factored in the settlement.

BRUSSELS (Reuters) - A draft text on extending Greece's bailout from its international creditors proposes prolonging the program by four months rather than a previously suggested six, officials from Greece and other euro zone states said on Friday.

One euro zone official also said a draft that was now under discussion by finance ministers included a requirement for Athens to submit by Monday a letter to the Eurogroup listing all the policy measures it planned to take during the remainder of the bailout period, to ensure they complied with conditions.

How long is a piece of string? We know something will give, we just don't know exactly what or when.

This came to mind:

Prepare ship for ludicrous speed! Fasten all seatbelts, seal all entrances and exits, close all shops in the mall, cancel the three ring circus, secure all animals in the zoo! - Colonel Sandurz (Spaceballs)